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March 04, 2014

Call Recording Companies Can Now Breathe Easier in California

By Tracey E. Schelmetic

TMCnet Contributor

While call recording is used on a daily basis by many companies, if not most, when it comes to customer support issues, the technology isn’t free of headaches from a legal perspective. While anyone who has ever done business over the telephone is aware that “this call may be recorded for quality purposes,” this generally applies to inbound calls when a customer is calling a company. The provision isn’t always as obvious in outbound calls, in which companies generally require live agents to speak the words.

Call recording rules very state by state, but California has some of the stiffest penalties for misusing call recording technology. California Penal Code Section 632 reads as follows:

“Every person who, intentionally and without the consent of all parties to a confidential communication, by means of any electronic amplifying or recording device, eavesdrops upon or records the confidential communication, whether the communication is carried on among the parties in the presence of one another or by means of a telegraph, telephone, or other device, except a radio, shall be punished by a fine not exceeding $2,500, or imprisonment in the county jail not exceeding one year, or in the state prison, or by both that fine and imprisonment.”

In the opinion of many legal experts, the statute has launched a thousand frivolous class-action lawsuits, but a recent court case may give companies some relief. In the judgment handed down in Hatisihi v. First American, Case No. B244769 (Cal. Ct. App. 2d Dist.), the California Court of Appeal affirmed the recent trend of class certification denials in cases brought under Section 632. Several attempted class actions have been dismissed because the plaintiff was unable to prove that the communication recorded was “confidential.”

Specifically, this case involves a company that engaged in both inbound and outbound calling for extended warranties. While customers calling the inbound number were warned that the call could be recorded, prior to 2009 First American did not require agents to state that outbound calls were being recorded. The plaintiff, which had a long-term customer relationship with the company and who had made many inbound calls, admitted that she had never before objected to the recording of a call, inbound or outbound, and that she generally understood that these calls would be recorded.

The court denied the plaintiff’s class action suit, which was aimed at her alleged invasion of privacy, because it said she was unable to prove that she expected privacy from the communication with the company. Seyfarth Shaw LLP attorneys Giovanna A. Ferrari and Jason Stiehl, writing an analysis of the case, say it bodes well for companies that engage in call recording for customer quality purposes.

“In recent years, plaintiffs’ lawyers have used and, arguably, abused section 632 (and similar state and federal statutes), bringing harrowing class cases against corporations, then demanding large settlements for quick resolution,” wrote Ferrari and Stiehl. “The First American decision should hopefully limit the number of Section 632 class action claims filed in the future, and provides strong support for the denial of pending cases seeking class certification.”

It’s critical that companies engaging in call recording understand the varying patchwork of state rules regarding call recording, and always notify customers that they are being recorded prior to beginning any transaction.